We are maintaining our Neutral recommendation on
), based on its fourth-quarter 2012 financial results, where the
bottom line topped the Zacks Consensus Estimates but the top line
fell short of the same. Weaker advertising revenue coupled with
lackluster movie box-office performance has resulted in a 17%
decline in revenue for the reported quarter.
Recently, Viacom-owned Nickelodeon and MTV channels (most
popular networks) are facing huge drop in viewership ratings,
thereby affecting its advertising revenue. Moreover, higher
programming expenses as well as sluggish economic growth will
continue to hamper revenue growth in near future. Furthermore,
stiff competition from online video streaming companies and
saturated U.S. cable TV industry will also act as a headwind for
the company while moving ahead.
On the flip side, strong free cash flow along with continuous
share repurchase and dividend payouts will act as strong
catalysts for growth going forward. Moreover, increased
investment on original program content will further step up TV
ratings in the forthcoming quarters.
Higher usage of smartphones and tablets has induced the
company to move toward TV Everywhere service offering. So, in
order to boost this new service offering, Viacom is constantly
renewing its contract with Hulu or striking new video streaming
Barnes & Noble, Inc.
) Nook readers and
) Kindle readers. The company has also renewed its contract with
), which will further drive the company's top-line growth going
forward. In addition, strong movie lineups for fiscal 2013 will
bolster the film division business of the company moving
We are maintaining our long-term Neutral recommendation
on Viacom Inc. Currently, it has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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